ROCHESTER, NY – This consumer alert looks at perhaps the second most important marriage of your life. The most important is marriage with your spouse. And the second is probably the marriage with your bank. And while all marriages require compromise, there are some compromises I’m not willing to make when it comes to my bank. One is the free check. The other is overdraft fees. I was inspired to take a look at this problem when I received a call from a viewer last week who returned a check to me. He has a fixed income: social security and a small pension. He called his bank and told them when his social security check would be deposited. He asked them to stop charging the overdraft fee. But they kept charging him a $35 fee every day. Consumer advocates call it abusive. And while many banks made headlines in recent years when they eliminated overdraft fees, a survey just released by Bankrate.com found that the vast majority of banks still charge them.
Congress, as well as the Consumer Financial Protection Bureau, have put a lot of pressure on banks to reduce or eliminate overdraft fees and non-sufficient funds fees. Overdraft fees occur when you don’t have enough money in your account to pay for the transaction… so the bank pays you and charges you a fee. Insufficient funds fees occur when the bank doesn’t pay for the transaction and charges you a fee anyway. There is some good news on that front. The Bankrate study found that the average overdraft fee is down 11 percent from last year to $29.80. But the vast majority of banks still charge you every time you don’t have enough money to cover the transaction.
“Our survey found that 96 percent of accounts still charge an overdraft fee and 87 percent still charge an insufficient funds fee,” said Greg McBride, chief financial analyst at Bankrate.com. “So these fees aren’t going away any time soon and consumers will have to be very vigilant to make sure they don’t incur those fees.”
But you have the power to eliminate these fees. You can choose not to receive overdraft coverage. You’d rather be denied your debit card than be charged $3 for your $5 latte. Sign up for overdraft protection by linking your savings account to your checking account. Monitor your account closely, divorce your bank, and take your money to an institution that doesn’t charge these fees. Click here to see some recommendations from Bankrate.com.
Many large banks like Citibank, Wells Fargo, Capital One, and Bank of America have eliminated or reduced these fees. Another pesky fee to be aware of is the out-of-network ATM fee. You can avoid this fee simply by getting more money when you make a purchase at a store. There you can access your money for free.